Exam 15: Property Transactions: Nontaxable Exchanges

Nancy and Tonya exchanged assets.Nancy gave Tonya her personal residence with an adjusted basis of $280,000 and a fair market value of $560,000.The house has a mortgage of $200,000, which is assumed by Tonya.Tonya gave Nancy a yacht used in her business with an adjusted basis of $250,000 and a fair market value of $360,000.What is Tonya's realized and recognized gain?

Carlos, who is single, sells his personal residence on November 5, 2019, for $400,000.His adjusted basis was $125,000.He pays realtor's commissions of $20,000.He had owned and occupied the residence for 12 years.Having decided that he no longer wants the burdens of home ownership, he invests the sales proceeds in a mutual fund and enters into a 1-year lease on an apartment.The detriments of renting, including a crying child next door, cause Carlos to rethink his decision.Therefore, he purchases another residence on November 6, 2020, for $275,000.Is Carlos eligible for exclusion of gain treatment under § 121 (exclusion of gain on sale of principal residence)? Calculate Carlos's recognized gain and his basis for the new residence.

Eunice Jean exchanges land held for investment located in Rolla, MO, for land to be held for investment located near Madrid, Spain.Her basis for the land given up is $450,000 and the fair market value of the land received is $500,000.Eunice Jean also receives cash of $45,000. a.What is Eunice Jean's recognized gain? b.What is her basis for the land received?

Gains and losses on nontaxable exchanges are deferred because the tax law recognizes that nontaxable exchanges result in a change in the substance but not the form of the taxpayer's relative economic position.

Milt's building, which houses his retail sporting goods store, is destroyed by a flood.Sandra's warehouse, which she is leasing to Milt to store the inventory of his business, also is destroyed in the same flood.Both Milt and Sandra receive insurance proceeds that result in a realized gain.Sandra will have less flexibility than Milt in the type of building in which she can invest the proceeds and qualify for postponement treatment under § 1033 (nonrecognition of gain from an involuntary conversion).

Jake exchanges land used in his business for a different parcel of land to be used in his business.His adjusted basis fo $325,000 and the fair market value is $310,000.The fair market value of the new parcel of land is $300,000.In additi receives cash of $10,000.Calculate Jake's realized and recognized gain or loss and his adjusted basis for the assets r

Which of the following statements is correct for a § 1033 involuntary conversion of an office building destroyed by fire?

A building located in Virginia (used in business) exchanged for a building located in France (used in business) cannot qualify for like-kind exchange treatment.

Bud exchanges land with an adjusted basis of $22,000 and a fair market value of $30,000 for another parcel of land with a fair market value of $28,000 and $2,000 cash.What is Bud's recognized gain or loss?

When boot in the form of cash is given in a like-kind exchange, recognized gain is the greater of the boot or the realized gain.

Sammy exchanges land used in his business in a like-kind exchange.The property exchanged is as follows: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Property Surrendered }$$\text { Property Received }$ Land \ 44,000 \ 60,000 \ 50,000 \ 43,000 Cash \ 5,000 \ 5,000 Liability on land \ 12,000 \ 12,000 The other party assumes the liability. a.What is Sammy's recognized gain or loss? b.What is Sammy's basis for the assets he received?

Ross lives in a house he received as a gift from his father.His father had lived in the house for 12 years.The adjusted basis of the house to his father was $160,000 and the fair market value at the time of the gift was $140,000.Ross sells this residence after living in it for 18 months for $150,000 and purchases a new home for $125,000.He incurs selling expenses of $7,000.What is Ross' recognized gain or loss and basis for the new residence? a.($17,000); $125,000. b.($17,000); $142,000. c.$3,000; $125,000. d.$3,000; $128,000. e.None of these.

Cole exchanges an asset (adjusted basis of $15,000; fair market value of $25,000) for another asset (fair market value of $19,000).In addition, he receives cash of $6,000.If the exchange qualifies as a like-kind exchange, his recognized gain is $6,000, and his adjusted basis for the property received is $21,000 ($15,000 + $6,000 recognized gain).

On October 1, Paula exchanged an apartment building (adjusted basis of $375,000 and subject to a mortgage of $125,000) for another apartment building owned by Nick (fair market value of $550,000 and subject to a mortgage of $125,000).The property transfers were made subject to the mortgages.What amount of gain should Paula recognize?

Shari exchanges an office building in New Orleans (adjusted basis of $700,000) for an apartment building in Baton Rouge (fair market value of $900,000).In addition, she receives $100,000 of cash.Shari's recognized gain is $100,000 and her basis for the apartment building is $800,000 ($700,000 adjusted basis + $100,000 recognized gain).

If a taxpayer exchanges like-kind property and assumes a liability associated with the property received, the taxpayer is considered to have received boot in the transaction.

Chaney exchanges land used in her business for another parcel of land.The adjusted basis for her land is $32,000. The land she will receive has a fair market value of $33,000.In addition, Chaney receives cash of $4,000. a.Calculate Chaney's realized and recognized gain or loss. b.Calculate Chaney's basis for the assets she received.

The maximum amount of the § 121 gain exclusion on sale of a principal residence is $250,000 for a single individual and $500,000 for a married couple.

Maud exchanges a rental house at the beach with an adjusted basis of $225,000 and a fair market value of $200,000 for a rental house at the mountains with a fair market value of $180,000 and cash of $20,000.What is the recognized gain or loss?

Katrina, age 58, rented (as a tenant) the house that was her principal residence from January 1, 2019 through December 31, 2020.She purchased the house on January 1, 2021, for $150,000 and continued to occupy it through June 30, 2022.She leased it to a tenant from July 1, 2022, through December 31, 2023.On January 1, 2023, she sells the house for $350,000.She incurs a realtor's commission of $20,000.Calculate her recognized gain if her objective is to minimize the recognition of gain and she does not intend to acquire another residence.